According to a new report, home construction in Los Angeles fell sharply in the first quarter of 2025.
The developer obtained permission for 1,325 new homes in the city of LA in the first three months of 2025, down nearly 57% from the same period last year.
In a report released Tuesday, research firm Hilgard Analytics denounced the sharp decline in a variety of factors that made it more difficult for developers to make profits, including high interest rates, tariffs, economic uncertainty and measurements of urban transfer tax.
Hilgard principal Joshua Baum said the January wildfires also likely played a role in causing widespread business disruption.
The first quarter decline was reported in most parts of the city, but the steepest drop-offs were in the council district, covering the west and northeastern parts of the San Fernando Valley, as well as the western and northeastern parts of South Los Angeles.
The fire’s impact may be temporary, but home construction had declined before January, with citywide permits falling between 2024 and 2024. It analyzes building and safety data in Los Angeles, including permits for new single families and multifaceted buildings, but not Adus.
A sustained drawback in housing developments can have a major impact on cities in the suffering of affordability and budgetary crisis.
Generally, economists say building more homes reduces the pressure of rising home prices and rents. New developments also tend to increase tax revenues.
Los Angeles Mayor Karen Bass announced on Monday plans to remove more than 2,700 city positions to close the roughly $100 million budget hole.
“From a long-term perspective, we say that if we’re not currently building, we’ll have higher prices and higher rents at some point in the future,” said Christopher Thornberg, founding partner at Consultancy Beon Economics.
The decline in development is not inherent to cities.
Housing developers are launching projects nationwide to deal with high interest rates and the recent tariff phenomenon.
Some developers say Measure ULA, the new Los Angeles city tax on large-scale real estate sales, has degraded the environment in LA compared to the county and other parts of the country, killing more projects.
Hilgard Analytics did not investigate housing construction outside of LA city in its report.
However, recent analysis from researchers at UCLA and RAND Corp. cites rapid cuts in sales of real estate where developers tend to build multi-family homes, potentially creating greater housing construction within the city than elsewhere in LA County.
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